Momentum appears to be building for a lower-cost iPhone, stoked in part by booming demand in China for Apple Inc.’s tablet PC the iPad Mini.

A report Wednesday from Taiwanese newspaper DigiTimes said checks with Apple suppliers point to launch of a cheaper iPhone by the end of the year.

Apple chief executive Tim Cook’s current visit to China has added to speculation about a device geared to emerging markets, where Apple is losing out to pre-paid Android devices from Korea’s Samsung Electronics.

While speculation about a low-end iPhone has made the rounds for years, with Bloomberg News predicting the development back in 2011, analysts said a convergence of events makes the model more likely than ever.

Success in China of Apple’s competitively priced iPad Mini tablet PC may have inspired Apple to reconsider a cheaper iPhone, said Topeka Capital analyst Brian White in a note to investors that cited retailer checks showing an “insatiable appetite” for the Mini.

Gene Munster of Piper Jaffray said there is a 60 to 70 per cent chance Apple will launch a $199 (U.S.), no-contract iPhone this year aimed at price-sensitive markets.

Apple Inc. shares dipped by 1.6 per cent, however, to close at $517.10 on the Nasdaq Wednesday, on fears that a lower price would erode profit margins, even while spurring sales.

Some analysts said a cheaper iPhone would threaten Apple’s legendary margins, the highest in the industry, driven largely by subsidies from network carriers.

And a down-market iPhone would contradict the well-know bias of deceased Apple co-founder Steve Jobs, who saw Apple as the Mercedes-Benz of computing devices.

Still, RBC analyst Amit Daryanani said that a lower-end phone, or “iPhone nano”, could help Apple counter the growth of cheaper Android-powered handsets in developing markets, and give a lift to domestic sales as well.

Bernstein Research analyst Toni Sacconaghi said that even though Apple is poised to see iPhone sales grow 40 per cent through 2014, it will likely lose market share if the company doesn’t bring out a lower-priced iPhone.

Munster noted that Apple already sells older models of its devices at a discount and said it could benefit from a product designed for the low end that would attract users who wouldn’t normally buy an iPhone.

DigiTimes said the new iPhone model would resemble the typical iPhone, but use a cheaper make of polycarbonate plastic, with many of the other parts remaining the same or being recycled from older iPhone models.

It said the cheaper phone would feature a bigger screen and a redesigned exterior, but would maintain key interior features.

Apple declined comment.

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